Commerce Versus Public Protection
2006 - Talk to any CPA about the problems facing the accounting
profession today, and you’re bound to hear the phrase
“substantial equivalency” repeated over and over
again. Indeed, substantial equivalency is one of the profession’s
hottest, most talked about issues. But what exactly does substantial
equivalency mean, and why is everyone so worked up
Why Cross-Border Licensing Must Be Handled
most people discuss substantial equivalency, they’re
talking about the ability (or, rather, the lack
of ability) of CPAs licensed in one state to practice across
state lines, freely and without restrictions. As it stands
now, CPAs practicing across state lines, even via the Internet,
often find themselves facing myriad obstacles, all of which,
at their core, stem from two competing principles in the
United States Constitution.
first is the Constitution’s Commerce Clause, which
says that states should not be allowed to inhibit interstate
commerce. The second is the constitutionally granted right
of the states to protect their citizens. Both of these constitutional
principles are sound, and both, individually, make sense.
They are intended to be a check and balance of one another.
checks and balances sometimes create conflict. For example,
as the Internet economy has blossomed, so too has the potential
for CPAs to serve clients doing business throughout the
nation and the world. Many states, however, in their attempt
to protect the public, have enacted laws saying that out-of-state
CPAs and CPA firms must first register and pay a fee before
doing business in their states, even if that business is
conducted solely over the Internet.
many CPAs, this restraint on mobility doesn’t seem
fair. Shouldn’t a CPA in one state have the same rights
and privileges as a CPA in another state? Shouldn’t
the CPA license be considered substantially equivalent across
state lines? Why should a CPA in New Jersey, for example,
be forced to pay a fee or go through the (often lengthy)
process of registering to practice in New York, when the
educational qualifications and continuing professional education
requirements for CPAs are similar?
let’s look at the situation from the perspective of
New York State officials. If this New Jersey-licensed CPA
does not have to register to practice in New York, how is
New York to know if the CPA’s credentials are properly
disclosed, or if the CPA has a professional ethics or disciplinary
problem? The answer: The state cannot know without some
form of reasonable notice submitted by the out-of-state
CPA, and it is unlikely to enact a law that is perceived
to leave citizens vulnerable. Requiring out-of-state CPAs
to submit a uniform, electronically transmitted notice to
another state could be a simple way to notify a state of
a CPA’s intent to practice without mandating registration,
but this solution could also require multistate, legislatively
approved notification provisions or an interstate compact.
a Workable Solution
these differing perspectives show, this is a complicated
issue, and reasonable people can disagree. There are no
easy answers. It is essential, however, that the substantial
equivalency problem be resolved quickly and that the profession
actively develop an appropriate solution.
But in its attempt to solve the problem, the profession
should avoid the temptation to implement a solution that
may, in the long run, turn out to be ineffective and impractical.
For example, a proposal for “no notification, no fee”
is currently on the table as part of a revision to the AICPA
and the National Association of State Boards of Accountancy’s
(NASBA) Uniform Accountancy Act (UAA), a model-bill approach
to provide uniform regulation for the profession.
a perfect world, “no notification, no fee” would
allow out-of-state CPAs to practice across state lines without
having to submit a notice or pay a fee. Sounds ideal, right?
Well, maybe not.
reason a “no notification, no fee” policy might
not be an ideal way to achieve substantial equivalency is
not because of any conceptual flaw, but because of its reach.
While “no notification, no fee” might make some
CPAs happy, it would not allow state legislators to feel
comfortable with their duty to protect citizens from inappropriate
professional practices. It is, therefore, an uncompromising
solution that is unlikely to win approval from many states’
legislators. Indeed, one of the reasons the UAA’s
substantial equivalency provisions have not been adopted
uniformly by now is because many state legislators believe
these provisions would hamper their ability to protect citizens
from unqualified out-of-state practitioners.
this year’s annual NASBA meeting, Ronald L. Blanc,
President of the California Board of Accountancy (CBA),
spoke about the importance of the notification requirement
for out-of-state CPAs who intend to obtain a one-year California
practice privilege. Blanc said the notification ensures
that: 1) proper credentials are disclosed; 2) the CBA is
alerted to the identity of out-of-state practitioners and
any professional ethics or discipline problems to protect
California consumers from harm; and 3) the administration
of enforcement action is improved by granting the CBA the
power to suspend a license or practice privilege granted
by the Board. He also recommended that NASBA develop a uniform,
single notification form for CPAs to use for cross-border
Role of the States
the profession is to achieve substantial equivalency, it
must not disregard the perspective of the states, whose
duty to protect the public must be considered. State officials
understandably want to know what’s going on inside
their borders, which is, in fact, the very idea behind state
licensure and regulation of the profession by state boards
to create a national license for CPAs or attempting to push
every state to uniformly adopt the same statutory or regulatory
language could be futile. The licensing of nearly every
profession in the United States is handled by the individual
states, not the federal government.
substantial equivalency is an important goal, but the profession
should work to get there intelligently and practically.
The Internet economy and increasingly blurry geographic
distinctions have expanded the reach of practicing CPAs.
But the profession should not forget that restrictions imposed
on professional licensing remain firmly in the hands of
state legislatures, and are likely to stay there.
Publisher, The CPA Journal
Executive Director, NYSSCPA